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Real Time Information (RTI)

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Why RTI?

Over the next 18 months there are going to be the most fundamental changes to the reporting regime behind PAYE since its inception in 1944. These changes will affect all employers operating UK payrolls and those providing pension payroll services.

Real Time Information (RTI) is being introduced to provide more accurate and up-to-date information on employees and pensioners which can be a particular issue for those with multiple jobs, a mix of pension and employment income, or those who frequently change jobs.

It has been recognised that central and local government require more up to date earnings information to allow it to manage its benefit payments more effectively. This is especially important for individuals whose earnings increase and decrease so that HMRC can improve the operation of the tax system. In addition the information will mean that more employees will pay the right amount of tax and NI in the tax year and help to reduce the year-end adjustments that come as a nasty surprise to some employees.

The RTI timetable

RTI will support the introduction of the Universal Credit planned for October 2013 which will replace the current multiplicity of out-of-work benefits and in-work tax credits.

From April 2012 a pilot process will be in place with selected employers and software providers (including Sage), to ensure that the system is thoroughly tested and issues resolved before April 2013.

In the period April 2013 to October 2013 all employers and pension payroll providers operating in the UK will be required to submit RTI employee payroll data to HMRC every time a payroll is processed.

What will RTI actually mean for employers?

RTI will mean filing an electronic return, containing data similar to the current year-end returns to HMRC, at the end of each payroll period.

Key HMRC data must be captured for each employee when setting them up on the payroll as it will no longer be possible to submit a P14 at year end with the missing information.

The following data must be captured as part of the payroll process:

  • Full name – forename(s) and surname
  • Actual date of birth in the format dd/mm/yyyy
  • Gender
  • National Insurance number

The most challenging piece of information to collect will be the National Insurance (NI) number, especially for those organisations that employ foreign nationals who will be required to apply for a NI number. To minimise delays in receiving this information a new NI number verification service will be introduced by the HMRC as part of the RTI roll out.

RTI reporting will become an integral part of an employer’s normal payroll activity. When employers run their payroll the payroll software will gather the information required and send it to HMRC. This will be done using the internet through the Government Gateway or by using Electronic Data Interchange (EDI) on or before the date payment is made.

There will be transitional costs of introducing RTI but analysis indicates that the system will be cheaper for employers and HMRC to operate once it is bedded in.

Going live with RTI submissions

Data quality will be key to the success of RTI and for this reason the go live process will include and Employer Alignment Submission (EAS). Once the EAS has been submitted HMRC will send an acceptance message to confirm that it has been received and that the employer is “live” from an RTI perspective.

After the next payroll run (and prior to the payments being made), the payroll data is sent to the HMRC in a Full Payment Submission (FPS). The HMRC will process this information and validate it each month to ensure that payments made are accompanied by earnings data that Department for Work and Pensions (DWP) can use for benefit assessment. However, it is important to note that HMRC cannot validate cash, cheque or internet banking payments. Employers will need to advise HMRC if the amount to be paid over does not tally with the totals of tax etc extracted from the Full Payment Submission. Where this is the case an Employer Payment Summary (EPS) will need to be sent.

How to ensure that you are ready for RTI

1. Talk to your software supplier to discuss whether the software you are using will be RTI compliant.

2. Assign responsibility, internally within your department, for RTI to ensure that all team members and stakeholders are kept up to date with information and requirements.

3. Review your current HR and payroll processes to ensure that you will have all of the information to make your Full Payment Submission each month.

4. Review current security settings to allow for any new data items to be input, viewed and reported.

5. Identify if there are any gaps in your current payroll reports to ensure that elements of your data is checked and correct prior to your Full Payment Submission.

6. Ensure regular communication with colleagues who will be involved (in any way) with providing or inputting data for your submission.